The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century

Published by EH.NET (May 2007)

Mark H. Rose, Bruce E. Seely, and Paul F. Barrett, The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century. Columbus: Ohio State University Press, 2006. xxvi + 318 pp. $50 (cloth), ISBN: 0-8142-1036-8.

Reviewed for EH.NET by William R. Childs, Department of History, Ohio State University.[1]

This book makes some contributions to our understanding of national transport regulatory politics in the twentieth century. The narrative is based on a good balance of secondary and primary sources, reasserts the importance of the presidency in regulatory matters, moves back to the 1950s the origins of the deregulation movement, and offers an initial synthesis of deregulation after 1980.

But the book is uneven in its contributions in part because it is more narrowly constructed than its title suggests. It is a book about the politics of transport regulation of three industries at the national level (railways, trucks, and airlines; water carriers are barely mentioned). The authors are not much concerned with state or local regulation or regulatory federalism or with other industries that were deregulated (e.g., banking and savings and loans). Most significantly, they do not focus analytically on economics (industry structures) and management decision making (management strategies and firm structures) and how those elements intertwined with regulatory politics. To these three historians, “the state” (a concept that they do not define clearly) made all of the decisions in regulation; economics hardly mattered; and, management (especially railroad executives) rarely made mistakes. Politics trumped economics, technology, and individuals, both before and after deregulation.

The book begins with a long preface in which the authors reveal that longtime conversations among them ? all historians of technology ? had led to the conclusion that “the introduction and operation after 1920 of technical means of delivering transportation services ? railroads, trucks, and airlines alike ? rested on distinctly political decisions made in political arenas. In virtually every discussion of transportation innovation, regulation, and deregulation, we find that politics was in the driver’s seat” (xii). Towards the end of their preface, they note: “Stated once again, in the realm of framing these three main transportation industries, their firms, and their markets, leaders of the American state always sat squarely in the driver’s seat” (xix).

Chapter 1 focuses on how the Interstate Commerce Commission (ICC) “framed” the railway industry (although at times Congress and the president make appearances in the narrative). Much of the chapter focuses on rate making, especially on the valuation project and value of service approaches, and the attempt, buttressed by the Transportation Act of 1920, to accept the “natural monopoly” aspect of railways and consolidate them into a more effective transportation system. The authors note, however, that this state action neglected to take into account the rise of a new industry, motor trucking. The ICC (and Congress) “had structured the railroad industry and attempted to set the terms of the railroad marketplace down to the last detail” (28). So rigidly focused on politics, the authors do not take into account the rapid appearance of motor trucking in the 1910s and 1920s as a new transport mode, and the difficulties railway management, ICC commissioners, and lawmakers faced in responding to the new technology.

Chapter two narrates the policy transition from consolidation to coordination of rail, truck, and water carriers, which some policy makers trumpeted in the late 1920s and 1930s. State actors, the authors maintain, enabled railways’ “new competitors” (trucks and airlines, and curiously, water carriers) to compete while restraining railways’ abilities to respond. (Water carriers, of course, had influenced railway rate structures as far back as the last quarter of the nineteenth century.) The tone of this and the preceding chapter takes on that of Railway Age, which was one of the key sources cited. The authors assert that the idea of “coordination” rested on the assumption that “each form of transport was different [and] that the public was better off if each mode, such as trucks or trains, remained a freestanding enterprise in competition with one another” (32). “The result was a ‘national’ system composed of separate transportation industries and separate transportation markets, each now defined variously as technology or mode and governed by several equally disconnected policies and regulatory agencies” (33). In part, this analysis makes some sense, but it misses some subtle and important points. For some public officials, “coordination” involved state planning through which each mode would perform what it did best (that is, follow its natural economic evolution), thus eliminating inefficiencies brought on by competition among the various modes. The authors do not take into account economic structures of the transport modes; they do not emphasize the ideas behind the political results; they ignore the fact that interest group politics (based in economic self-interests and on ideas) undermined what some on the ICC (Joseph B. Eastman, for example) desired; and they underplay the management decisions of railway executives.

Following a fine summary in Chapter 2 of the early years of airline regulation, Chapter 3 focuses on regulation of the airlines between 1944 and the early 1970s. Again the authors present the national state as the shaper of the industry, in this case through the efforts of the Civil Aeronautics Board (CAB). The government had been both promoter and regulator of the nascent industry, offering mail contracts to help sustain the new businesses and limiting competition. Not until World War II, however, did the CAB gain more influence to shape the industry through controlling entry, price, and routes. By the 1970s, however, it had come to be viewed as a failed regulatory agency. Unlike with the railways, the authors admit that airline management made some mistakes (e.g., not understanding the overcapacity wrought by jets nor the attempts by CAB to offer service to more than business class customers), but they do not emphasize this theme. To them the CAB ? or the state ? had created the industry and had failed to promote and regulate it effectively.

Chapter 4 is a sprawling survey of railroad and truck regulation in the postwar era before deregulation emerged. It furnishes at times a useful synthesis, but its most important contribution is its focus on President Dwight D. Eisenhower and his administration’s efforts to bring about deregulation. The chapter notes the effectiveness of truckers in blunting the administration’s efforts to help the railways, includes a testy analysis of rate bureaus, and offers a survey of railway mergers, with an extended section on the Penn Central merger. There, the authors list some of the problems (e.g., management failed to see that the computer systems in each firm did not match the other’s and labor leaders failed to note the cultural differences between the working groups), but they still insist that the railway problem was mostly tied to the regulatory system, which the ICC/state had imposed.

Chapter 5 continues the focus on presidential initiatives in the deregulation movement. President Lyndon B. Johnson included a coordinated transportation system in his approach to “fine-tuning” the economy. While he did get a Department of Transportation (in 1966), he did not get the centralized, presidential clout he thought necessary to shape a coordinated and efficient transportation system. Chapter 6 shows how President Richard M. Nixon “helped move the idea of deregulation from the realm of the thinkable ? where Eisenhower and Kennedy had left it ? into the mainstream of American politics” (151). Collapse of the Penn Central in the spring of 1970, along with a less robust economy than Johnson had enjoyed, shaped Nixon’s approach. He was the first to meet with the railway executives and union leaders about deregulation; he saw the significance of utilizing the consumer movement to promote deregulation; and, he was able to do what Eisenhower, Kennedy, and Johnson had not ? gain presidential appointment power for the chair of the ICC (a theme that the authors overplay, in that while it was a political issue it was not all that significant to reforming the regulatory state).

Although in office only a short while, Gerald R. Ford deserves the treatment received in Chapter 7. President Ford’s staff organized an anti-regulatory public relations campaign and carefully identified and organized pro-deregulation members in Congress. The result was modest but notable ? passage of the Railroad Revitalization and Regulatory Reform Act of 1976. In exchange for furnishing loans to ailing railroads and devising Conrail, the act began to loosen government rate controls and to allow abandonment of service (which the ICC, following the law, had restricted, thus maintaining high operations costs, which in turn undermined railway efficiencies and competitiveness). The regulatory regime from the 1920s was still in place, however, and there was not much movement on deregulating trucks and airlines. Still, the authors persuasively argue that President Ford’s efforts laid the groundwork for more political success very soon.

In Chapter 8, the authors show that President Jimmy Carter, while bringing no new ideas to the arena, nevertheless promoted deregulation through the regulatory commissions and in Congress. This is one area in which Carter appeared to have developed effective congressional relations, for he was able to bring about deregulation of airlines in 1978 and trucks and railways in 1980. Yet, the authors go too far in their assertions. Take for example their conclusion on truck deregulation (which opened entry to the industry and relaxed rate controls): “Carter and his top officials … had created one market for all truckers, replacing distinct submarkets” (203). Instead of a singular force ? the “state” ? it was a combination of changing economic conditions, shifting political powers, and new ideas about consumerism, regulation, and economic growth that shaped the decision to open up trucking competition. Carter’s administration played a role, but it was not the omnipotent one asserted by the authors.

The last chapter, “The American State and Transportation, 1980-1995,” includes a useful overview of what happened after the flurry of deregulation statutes in the late 1970s and early 1980s. Essentially, the authors argue that deregulation spread through the processes of “devolution” and “deinstitutionalization,” thus giving more freedom to transport executives to follow market forces. The ICC was dismantled; Congress preempted state regulatory commissions of their powers; intermodal activity increased; railways merged and abandoned unprofitable routes; new airlines entered and left the industry, with a resulting concentration as airlines took up defensive positions in airport hubs. The authors consistently follow their theme of “state” construction; for the airline industry, they conclude that “In reality, the absence of overt federal action to limit the growth of fortress hubs had framed the postderegulation airline industry” (237).

There is no concluding chapter, although the last few pages restate the authors’ point of view about “state” powers and add a new perspective not specifically noted earlier: “The barrier to understanding deregulation of transportation firms in 1978 and 1980 as more than a simple withdrawal of the federal government from markets rests upon the limits of language and with our ideologically driven conceptualization of a market as a counterpart to an imagined state of political nature ? a place sacred in its origin and lacking institutional constraint. Rather than dichotomizing markets and regulation, it makes more sense to perceive them along a continuum shaped in both cases by the leaders of the American state ? with regulation and deregulation representing different types of legal and administrative strategies for organizing the activities of transportation managers and workers” (238).

In summary, the book offers a mixed bag of ideas and insights. On the one hand, the shifting of the deregulation movement in time (back to at least the 1950s) and in focus (on the executive branch) is notable and important. On the other hand, the authors’ point of view throughout the book undermines the contributions they make. No one can deny that politics is part of the story, or that “the state” is involved in shaping regulation (and deregulation). Without acknowledging it directly, however, the authors have completely ignored the powerful argument Thomas K. McCraw made in Prophets of Regulation (Cambridge, MA: Belknap Press, 1984): “More than any other single factor, this underlying structure of the particular industry being regulated has defined the context in which regulatory agencies have operated” (p. 305, emphasis in original). McCraw understood regulation to be a political art (p. 63), but one that took place within the context of industry structures and natural economic markets. My own research in regulation has confirmed this conclusion. For Rose, Seely, and Barrett, apparently, there is nothing natural about industry structures; they do not shape politics but politics shape them. This point of view, rigidly applied throughout the book, undermines the important contributions noted above.

[1] The reviewer did not have any direct input into this volume.

A note on the authors: During the preparation of the manuscript, Paul Barrett, Department of Humanities at Illinois Institute of Technology became ill, passing away in 2004. Bruce Seely (Michigan Technological University/NSF) and Mark Rose (Department of History, Florida Atlantic University) continued the preparation of the manuscript. Seely drafted the first two chapters; Barrett the third; and Rose 4-9.

William R. Childs has published most recently The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century (College Station, TX: Texas A&M University Press, 2005).